The cruise industry has been hard hit by the coronavirus, forcing companies to dock their ships at port and wait out the storm. While there’s pent up demand - evidenced by the surge in late-summer bookings for Carnival (CCL) - Get Report - the companies’ financials are in obvious peril.
For Norwegian Cruise Line specifically, it has lagged its peers. Shares are still down 83% from the 2020 high, worse than the 77% decline in Carnival and the 75% fall in Royal Caribbean (RCL) - Get Report.
It’s lagging on the upside, too. Norwegian stock is up “just” 41% from its lows, while Royal Caribbean and Carnival Cruise are up 73.5% and 52%, respectively.
Trading Norwegian Cruise Line
As you can see on the chart, Norwegian stock has badly lagged the broader market’s rally. It might be up more than the S&P 500 from its lows, but in terms of relativity, these charts look bleak at best.
On a closing basis, Norwegian was never able to reclaim the 23.6% retracement. For reference, the S&P 500 climbed up to the 61.8% retracement.
It’s also noteworthy that shares found resistance at $17.50, could not breakout and hold up above its key moving averages, and is now breaking below uptrend support.
This is not the chart of a healthy stock.
I don’t like to make pre-earnings trades ahead of a binary event. While expectations should be quite low heading into the quarter — and Wednesday’s near-10% beating and this week’s 17% decline help lower those expectations — it’s still hard to be bullish on such a poor-looking chart.
Yet, on a bullish reaction investors need to see Norwegian close above $13.06. If it can, it propels shares back over the 20-day and 50-day moving averages, as well as uptrend support. It opens the door up the $16.50 to $17.50 area.
On a bearish reaction, see if Norwegian stock trades down to the April lows near $8.10. A close below puts the 2020 low near $7 in play.